Explanation
Background: This Ordinance authorizes the Director of the Department of Finance and Management to enter into a Underground Limestone Mining Lease with Columbus Limestone, Inc. (CLI) a subsidiary of Shelly Materials, Inc., for subsurface (underground) mining of limestone and other minerals under the City owned property, containing approximately 52 acres, located at 2500 Jackson Pike, Columbus Ohio. CLI currently operates an "open pit" mine on its property adjacent to this site. This lease will allow CLI to continue their mining operations in this area without necessitating disturbance of the ground surface or creating interference with the above ground uses of the City's property. Portions of the surface ground of this same location are leased to the Solid Waste Authority of Central Ohio (SWACO).
The feasibility of limestone mining at this location has been under discussion among the interested parties for several years. Initially, the City authorized CLI to conduct "open pit" type mining activities on a portion of its 2500 Jackson Pike property. After further discussions among the parties and before any mining activities commenced, it became apparent that surface mining of the site limits any expanded mining operation on the site. The ability to expand mining operations is in the best interest of both the City and CLI. Based on these discussions, SWACO agreed that it no longer wished to be involved in the leasing of the mineral rights and released its right to sublease the mineral rights to CLI.
Subsurface or underground mining via the "room and pillar" method is the preferred method for extraction of limestone and other minerals as it does not disturb the surfaces uses of the property and creates the opportunity to develop the subsurface mined area for an underground storage facility upon the cessation of mining activities. The storage facility will potentially have commercially leasable space which would provide a future revenue source for the City. Upon execution of the Underground Limestone Mining Lease and payment of a $250,000.00 Advance Option Fee, the proposed mining agreement contains an option that grants CLI the future right to negotiate a lease, acceptable to the City, to develop an underground storage facility upon cessation of mining activities. The specific terms of the agreement for the lease and development of the underground storage facility will be addressed at a future date by a separate agreement.
Experts both from the mining industry and legal profession were consulted to assist the City in defining the appropriate financial and business terms of its proposed Underground Limestone Mining Lease agreement with Columbus Limestone, Inc., to allow the subsurface mining of limestone and other minerals under the City's property. The mineral lease agreement that is contemplated is believed to be in the City's best interest to pursue.
Fiscal Impact: The City will receive a payment of a royalty equal to six percent (6%) of sales on all materials produced by mining activities, including limestone aggregate and all other industrial mineral materials. Upon execution of the mineral lease agreement, the City will receive a $250,000.00 Advance Option Payment securing CLI's future right to negotiate a lease, acceptable to the City, to develop a storage facility upon cessation of mining activities. Within ninety (90) days of the execution of the agreement, the City will receive an advance royalty payment of $1,500,000.00.
Emergency Justification: Emergency action is requested to allow for the immediate execution of a mineral lease agreement by the City in order that the City may receive the prepaid royalty income and prepaid option fee at the earliest date allowed under the terms of the agreement.
Title
To authorize the Director of the Department of Finance and Management to execute an Underground Limestone Mining Lease with Columbus Limestone, Inc. to allow subsurface mining activities at the City's property located at 2500 Jackson Pike, Columbus Ohio; and to declare an emergency. (AMENDED BY ORD. 1340-2010 PASSED 9/27/2010)
Body
WHEREAS, the City owns that certain real property containing approximately 52+/- acres, commonly known as 2500 Jackson Pike, Columbus Ohio; and
WHEREAS, Columbus Limestone, Inc., a subsidiary of Shelly Materials, Inc. (CLI) wishes to lease the mineral rights beneath said City property to conduct mining activities for the extraction of limestone and other minerals; and
WHEREAS, the Department of Finance and Management, Real Estate Management Office, and the City Attorney's Office, Division of Real Estate, have reviewed CLI's mining proposal and have consulted with outside experts to develop a mineral lease agreement in the City's best interest; and
WHEREAS, an emergency exists in the usual daily operation of the City of Columbus, in that it is immediately necessary to authorize the Director of the Department of Finance and Management to execute those documents necessary to enter into a mineral lease agreement for the immediate preservation of the public health, peace, property, safety and welfare; now, therefore:
BE IT ORDAINED BY THE COUNCIL OF THE CITY OF COLUMBUS:
SECTION 1. That the Director of the Department of Finance and Management be, and hereby is, authorized to enter into and execute an Underground Limestone Mining Lease with Columbus Limestone, Inc., a subsidiary of Shelly Materials, Inc., for subsurface mining of that City owned property, located at 2500 Jackson Pike, Columbus Ohio .
SECTION 2. That the terms and conditions of the limestone mining lease shall be in a form approved by the Department of Law, Division of Real Estate and shall include the following:
The lease shall be effective for a term of ten (10) years.
CLI shall pay City a royalty of six percent (6%) of sales on all materials produced by mining activities, including limestone aggregate and all other industrial mineral materials, marketed to third parties including CLI affiliates;
CLI shall pay an advance pre-paid royalty of $1.5 million dollars payable to City within ninety (90) days of execution of the lease agreement;
CLI shall make an Advance Option Payment of Two Hundred Fifty Thousand Dollars ($250,000.00) payable upon execution of the mining lease agreement for the future right to negotiate a lease, acceptable to the City, for development of an underground storage facility upon the cessation of mining activities.
CLI shall be required to submit quarterly written reports to City of the total value of its sales or other dispositions of limestone aggregate and other industrial mineral materials to third parties and/or to its affiliates, identifying the types of materials that have been sold, the quantity of the respective materials that have been sold and the total amounts of money or other consideration that have been received by CLI during that quarter year.
Such other terms and conditions as agreed to and approved by the City Attorney.
SECTION 3. That the revenue collected from the lease shall be deposited in the special revenue fund designated the Mined Assets Fund:
Department/Division: 45-01
Fund: 289
OCA Code: 289001
Object Level 1: 03
Object Level 3: 047
SECTION 4. That for the reasons stated in the preamble hereto, which is hereby made a part hereof, this ordinance is hereby declared to be an emergency measure and shall take effect and be in force from and after its passage and approval by the Mayor or ten days after passage if the Mayor neither approves nor vetoes the same.